Growing need for bold initiatives

It is clear Nepal has embarked on the restructuring of her economy, which could benefit the Indian states in her neighbourhood, especially those in the North-east.

Rangan Dutta | October 8, 2018 3:19 am

It is somewhat strange that the visit of Pushpa Kamal Dahal “Prachanda”, the former Prime Minister of Nepal and chairman of the country’s ruling Communist Party, to the Punjab Himachal and Delhi Chamber of Commerce in New Delhi to inaugurate the India Nepal Centre didn’t get the due media coverage.

On the contrary, Nepal’s decision to avoid taking part in the first “anti-terror military exercise” of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation at Pune was highlighted extensively. Nepal’s action was interpreted both as a snub to India and a pro-China stance.

That is somewhat off the mark as in today’s world, economic strength is “the currency of power” and thus, economic relations, trade, investment and technology exchanges define the strategic relationship between nations and not only defence cooperation. In any case, the “anti terror military exercise”, in which Bangladesh and Sri Lanka took part, will be a regular feature and Nepal can well participate in future.

From this perspective, Dahal’s address to the packed house at the PHDCC hall and discussions with the assembled group of development specialists, diplomats, investors and industrialists on the theme, “Road maps for accelerating Nepal’s inclusive growth”, signal a positive direction in Indo-Nepal relations. The PHDCC and its chairman, Anil Khaitan deserve recognition for the bold initiative of setting up the India Nepal Centre under the chairmanship of KV Rajan, former Indian Ambassador to Nepal and a well known Nepal expert.

It has been established with a broad mandate to help growth of increased trade, investment and technology cooperation between the Indian private sector and its Nepali counterparts in areas the PHDCC identified as mutually beneficial. They are growth of enterprises in the employment- generating medium, small and micro enterprises, hydropower development and establishment of strong trade investment and technology upgradation and linkages to boost entrepreneurship in MSME, skill development, manufacturing and services in Nepal.

Agriculture, which engages 66 per cent of Nepal’s population of 29 million and contributes 36 per cent to its GDP of US $ 989 million, needs diversification and requires a strategy to develop agro processing, especially fruit processing, organic farming and floriculture. Tourism in Nepal needs a big push by concerted efforts to upgrade infrastructure in the sector.

Addressing the conclave, Dahal referred to the historic “cat and mouse” analogy then Chinese President Deng Xiaoping gave to the world, “It doesn’t matter if the cat is black or white as long as it catches the mice” to herald a commitment to a market-led economic growth path.

The message of Dahal was clear —Nepal has decided to opt for an open market-led economic development strategy departing from the professed communism, which ironically enabled the Communist Party of Nepal to mobilise the masses and capture power.

That was clear in the conclave’s theme. Everyone knows that “inclusive growth” is stressed when a nation state’s political economy and its GDP growth enrich primarily the owners of capital, inherited wealth and enterprises as documented brilliantly in Thomas Picketty’s path-breaking work, Capital in the 21st century but bypasses the masses, who find prospects for advancement bleak.

Dahal must be aware that Deng’s China is now among the most unequal of nations and there is growing demand there for inclusive growth despite her tall claims of being “a socialist country with Chinese characteristics”. Thus a policy to broaden the base of MSMEs, skill development and entrepreneurship is certainly a sound move as its strong point is employment generation.

That said, given Nepal’s situation today, the first step for inclusive growth must be land reforms and a sustainable land use policy. As of now the situation is difficult as the annual growth of agricultural produce has been only 2.4 per cent while the population is growing at 2.6 per cent annually.

The average productivity of cereals at 2.85 metric tons per hectare is among the lowest in South Asia as agriculture in Nepal has remained at the subsistence level and is not market-oriented primarily because land reforms were not carried out though. The Asian development experience shows that, like in South Korea, land reforms are the first step to growth as it creates a market by raising the purchasing power of the rural masses.

Apparently, there has been no dearth of policies. Since 2000, the government has made as many as 20 policies covering practically all aspects of growth such as science and technology (2012), biotechnology (2012), agriculture (2004), dairy development (2007), cooperatives (2012) and industrial development (2010), though it is not clear how well those policies have been implemented. Nepal could as well make good use of the technology resources of the Kathmandu-based International Center for Mountain Development.

Financial inclusion is central to inclusive development, which is another important area in which Nepal is better positioned, as the Nepal Agricultural Cooperative Central Federation has a network of 750 cooperatives and a membership base of 8.5 lakh. A network of Self Help Groups along the Grameen Bank model of Bangladesh but linked to cooperatives could bridge the gaps in financial inclusion.

It is clear from Dahal’s address that Nepal has embarked on the restructuring of her economy, which could benefit the Indian states in her neighbourhood, especially those in the North-east. That calls for initiatives from the North-east and the North-Eastern Council because left to herself, Nepal’s priority, as a partner of the Bimstec, would be to reach the Association of South East Asian Nations through North Bengal and Bangladesh, thereby bypassing the region.

The recent decision to connect Kakarbhitta in Nepal to Siliguri by a rail link taken in the Bimstec meeting held at Kathmandu is a step in this direction. It is now time to build a Nepal- North East Economic Corridor, linking Kathmandu-Siliguri-Guwahati, and make it central to the Act East policy.

It would require linkages between the trade and industry associations of the North-east, Bengal, Sikkim and of course Bhutan with their counterparts in Nepal and North India. There is a real need to set up a Nepal-North East Centre under the umbrella of the India Nepal Centre and the NEC, as the region’s planning body, could be the catalyst.

The writer is a retired IAS officer of the Assam-Meghalaya cadre and has served as a scientific consultant in the office of the principal scientific advisor to the Government of India.